According to the Kaiser Family Foundation, employers are spending more on benefits than at any point in history, yet employees remain overwhelmed, distracted, and increasingly stressed. This affects employee morale and engagement, and impacts organizational productivity. Yet that disconnect rarely gets the scrutiny it deserves.
For decades, companies viewed benefits as an investment in organizational performance. They offered them to attract talent and retain employees. Every dollar spent on benefits represented a conscious tradeoff: Leaders believed that dollar would create more value than spending it elsewhere, whether through direct compensation, technology investments, or other business priorities.
HIGHER PRICES, NO WORKFORCE ADVANTAGE
Those objectives remain, but employers are changing where the money goes. Over the last several decades, healthcare costs have steadily consumed a larger share of benefits budgets. According to the Kaiser Family Foundation’s 2025 Employer Health Benefits Survey, the average annual premium for family coverage reached nearly $27,000, rising 6% year-over-year and marking the third consecutive year of increases at or above that level. Over the past five years, family premiums climbed 26%, reshaping how employers allocate benefits dollars.
The pressure is only intensifying. Mercer reported that employer healthcare costs are expected to increase 6.7% in 2026, pushing average spending above $18,500 per employee. Other forecasts from Aon, PwC, Segal, and Business Group on Health projected cost trends at around 9%. As employers head into the 2027 renewal cycle, few expect meaningful relief. If anything, the market increasingly expects another round of significant premium increases.
As healthcare spending rises, more benefits dollars are being redirected toward managing cost inflation rather than creating workforce advantage. Employers are investing more each year simply to maintain existing coverage.
Healthcare remains essential, of course. Employees expect it, and employers can’t avoid it. But there is a meaningful difference between something that is necessary and something that creates competitive advantage. Most employees don’t choose an employer because of a slightly lower deductible, and most organizations would struggle to draw a direct line between rising healthcare expenditures and improvements in productivity, engagement, recruitment, or retention.
DIMINISHING RETURNS
At some point, every investment encounters diminishing returns. When it comes to healthcare spending, many employers may already be there.
This is not an argument against healthcare benefits. They remain foundational and will continue to be one of the most important investments organizations make. The question is whether employers have become so consumed with managing healthcare costs that they have lost sight of the outcomes that benefits were originally designed to achieve.
Those outcomes extend well beyond healthcare. Many of the issues that most directly affect workforce performance sit outside traditional benefits categories. Employees are juggling caregiving responsibilities, financial pressures, bureaucratic complexity, home emergencies, insurance disputes, and countless logistical demands that compete for their time and attention. These are the everyday realities that pull employees away from their work and make it harder to perform at their best.
LIFE IS NOT NEAT CATEGORIES
Consider caregiving alone. Research published in Value in Health found that 23% of employed family caregivers of older adults reported absenteeism or reduced productivity due to caregiving responsibilities. Financial stress creates similar challenges. PwC’s 2026 Employee Financial Wellness Survey found that 57% of employees are financially stressed and 56% said the financial stress reduced their productivity.
In conversations about benefits, leaders often focus on categories: healthcare, retirement, wellness, disability, voluntary benefits. Employees experience life differently. A denied insurance claim may involve healthcare, finances, family responsibilities, and hours of administrative work. A move across the country can quickly become a mix of housing, childcare, transportation, and financial decisions. Real life rarely arrives in neat categories, yet benefits strategies are often designed as if it does.
Viewed through that lens, what looks like a benefits problem is often a distraction problem. Employees are spending increasing amounts of time navigating the growing complexity of modern life, and that complexity carries a measurable business cost. It shows up in lost focus and delayed projects. It’s also seen in burnout, turnover, and lower overall performance. The challenge is capacity along with life’s growing demands, which consume attention and energy that would otherwise be directed toward work.
BENEFITS ROI
This suggests a different way to think about benefits ROI.
Rather than evaluating benefits based solely on category, utilization, or historical precedent, employers should view benefits dollars as fungible capital competing for the same business objectives. Every dollar allocated to a benefit should be measured against the outcomes the organization is trying to achieve: attracting talent, retaining employees, increasing productivity, improving engagement, reducing burnout, or strengthening workforce resilience.
Some organizations are already moving in this direction. One executive recently described to me that she maps every benefit on a simple matrix that compared cost against signal, defined as the extent to which employees valued, used, and talked about the benefit. This exercise was designed to identify which investments were genuinely influencing workforce outcomes and which had become wasteful.
This is the most important question companies should be asking about their benefits. As healthcare costs continue rising, employers will face increasing pressure to determine whether each dollar spent on benefits is moving the needle.
Healthcare will remain the foundation of every benefits strategy. But leaders should be careful not to confuse a necessary investment with a strategic one. The organizations that gain the greatest workforce advantage are rarely the ones that spend the most on benefits. The greatest advantages come from rigorously connecting benefits spending to the outcomes the business cares about, and invests accordingly.
Jon Cooper is cofounder and CEO of Overalls.
